Burden of Demonstrating CAFA Jurisdictional Amount Lowered for Ninth Circuit Defendants

Following the rule announced in Standard Fire Ins. Co. v. Knowles, the Ninth Circuit has reversed course on the burden borne by defendants seeking to remove under the Class Action Fairness Act (“CAFA”). Now, defendants need only establish the amount in controversy by a preponderance of the evidence.

In Rodriguez v. AT&T Mobility Services, the Ninth Circuit was faced with a putative class representative’s waiver of all damages above $5 million. The waiver was designed to avoid removal under the Class Action Fairness Act (“CAFA”), but earlier this year, the Supreme Court held in Standard Fire that such waivers are ineffective. Therefore, the Ninth Circuit vacated the District Court’s order remanding the case to state court and remanded to the District Court for further proceedings.

Beyond the effectiveness of the waiver, however, the Ninth Circuit had to grapple with a broader question: What is the impact of Standard Fire’s reasoning on the Ninth Circuit’s rule — enunciated in Lowdermilk v. U.S. Bank — that a defendant must establish to a “legal certainty” that the amount in controversy exceeds the $5 million threshold? According to the Ninth Circuit, Standard Fire effectively overruled Lowdermilk, and the proper standard is the “preponderance of the evidence” standard.

Lowdermilk’s holding, the Ninth Circuit stated, was based on the proposition that the plaintiff is the “master of the complaint” and can forgo a portion of the putative class’s recovery by waiving damages above $5 million. Lowdermilk declared that the jurisdictional question is determined only by looking at the four corners of the complaint. The legal certainty standard it announced was a means of protecting a plaintiff’s right to waive damages above the jurisdictional amount.

But under Standard Fire, a CAFA-avoiding waiver is ineffective. Because a pre-class certification stipulation to damages below the jurisdictional amount cannot bind members of the proposed class, courts must aggregate all potential class members’ claims to determine whether it has jurisdiction under 28 U.S.C. § 1332(d). To do this, courts must look beyond the complaint.

According to the Ninth Circuit, Standard Fire “so undermined the reasoning of our decision in Lowdermilk that the latter has been effectively overruled.” The Court then stated that a defendant need only establish, by a preponderance of the evidence, that the amount in controversy exceeds the jurisdictional minimum. This is the same standard that applies when a plaintiff does not plead a specific amount in controversy.